Japanese Yen as an Alternative Vehicle Currency in Asian Countries

Members of Asian countries have been thinking about using another currency instead of the US dollar for regional trade. Hence, there is a strong case to study the Japanese yen as an alternative hard currency in this region for trade transaction. This paper investigates the long run cointegration to determine the possibility and feasibility to use yen as a future vehicle currency in the Asian region namely Malaysia, Singapore, Thailand, Indonesia, Philippines, China, Korea and India by examining their daily exchange rate movements denominated in yen. Empirical evidence shows that four out of eight countries, namely, Malaysia, Philippines, Singapore and Korea are the countries that support this hypothesis.